Japan - the 'Mother of All Bubbles'

Paul Krugman and other economists think Japan is doing better than the U.S. and others. They better think again--

Japan's Debt Addiction Creating 'Mother of All Bubbles' - Yahoo! Finance: " . . Andy Xie, an independent economist, agrees that Japan's debt situation is not sustainable and that the country is becoming increasingly reliant on foreign capital flows. Even though the yield on 10-year JGBs is less than 1 percent, the interest expense is expected to top 22.3 trillion yen ($280.6 billion) in the current fiscal year, Xie said. "This is one-quarter of the budget," he added. "If the bond yield rises to 2 percent, the interest expense would surpass the total expected tax revenue (this year) of 42.3 trillion yen." Xie added that Japan is caught in a vicious cycle - it needs a strong yen so that yields, and hence interest costs can stay low, but a strong currency kills domestic companies. "A strong yen makes people willing to take on the low yield, people think that by buying into the Japanese yen, they may make (money) on capital gains," Xie said. "But once people realize that a strong yen is really hollowing out the Japanese industry like automakers and electronics firms, there will be a real backlash." Another expert who is worried about high levels of debt is Richard Duncan, Chief Economist of Blackhorse Asset Management, and also the author of "The New Depression: The Breakdown of the Paper Money Economy. . . "

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